Transportation Network Companies: Insurance Coverage Challenges and Implications

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1 Transportation Network Companies: Insurance Coverage Challenges and Implications Craig Andrews, CPCU ARM ARe AU-M AMIM ASLI AAI Business Insurance Product Development Officer State Auto Insurance Companies Columbus, Ohio

2 Have you seen or used any of these sites? get.lyft.com

3 Transportation Network Companies A vehicle owner provides transportation services to others in exchange for what the TNC refers to as a donation (known as ridesharing ) Concept originally developed in CA 1990s The heart of the TNC service is an online-enabled smart phone app Hundreds of peer-to-peer ridesharing networks have appeared across the U.S. The list of competitors to Uber, Lyft and Sidecar continues to expand exponentially!

4 Uber.com

5 Drivers must: Be at least 21 Typical TNC Requirements From Lyft s Website Have their own car, 2000 model year or newer Own an iphone or Android Pass a telephone screening and in-person meeting Pass background and DMV record checks Have a valid personal auto policy which meets or exceeds state requirements Driver s vehicle must pass Lyft s inspection

6 Typical TNC Requirements Drivers obligations under Lyft s contract: Driver is solely responsible for any and all liability resulting from or is alleged to be resulting from the operation of his vehicle to transport riders Driver agrees to indemnify and hold Lyft harmless for any losses, costs, liabilities and expenses arising out of the use of the Lyft service, including: Breach of the agreement Violation of any law Any allegation that the driver.violated trade secrets, trademarks, copyrights, etc. Ownership, use or operation of a motor vehicle Any other activity in connection with the service

7 What does all this mean to the insurance industry?

8 TNC Implications Most TNC drivers/operators will likely insure their vehicle under an ISO or ISO-based Personal Auto Policy (PAP) Some TNC drivers might: Be relatively naïve when it comes to insurance and legal matters Not seek professional advice Receive questionable insurance advice Since the ISO PAP is the likely insurance coverage vehicle for many TNC operators, let s take a quick look at it

9 TNC Insurance Issues The ISO PP Personal Auto Policy excludes livery conveyance under all its coverage Parts: Liability Medical Payments Uninsured Motorists Physical Damage IRMI definition of public or livery conveyance use : The transporting of people and/or goods for hire, such as by a taxi service, motor carrier or delivery service. The ISO PP includes no contractual liability coverage

10 TNC Insurance Issues In addition: ISO has introduced a new endorsement intended to reinforce the PP livery conveyance exclusions: PP Public or Livery Conveyance Exclusion Endorsement PP adds a new definition: Transportation network platform means an onlineenabled application or digital network used to connect passengers with drivers using vehicles for the purpose of providing prearranged transportation services for compensation Approved in Indiana

11 TNC Insurance Issues ISO has also introduced two new coverage buy-back endorsements for transportation network platforms PP Transportation Network Driver Coverage (No Passenger) Covers the period from the time the driver logs onto the TNC app up until the moment before the passenger steps into the vehicle PP Limited Transportation Network Driver Coverage (No Passenger) Covers the period from the time the driver logs onto the app until they accept a ride. It does not cover the time immediately following their acceptance of the fare while they are driving to pick up the passenger, or the time when the passenger is in the vehicle Indiana has introduced its own slightly different versions: PP and PP

12 Given PAP coverage limitations for TNC/Ridesharing operators Lyft s website includes information for prospective drivers: (

13 Coverage Offered by Lyft Contingent Liability Covers while in driver mode but before a ride request is received $50,000/$100,000/$25,000 limits no deductible Excess Liability Once a ride has been accepted and vehicle is occupied by passenger(s) $1 million limit Excess of driver s insurance Excess Uninsured/Underinsured Motorists $1 million limit Excess of driver s insurance No deductible

14 Coverage Offered by Lyft Contingent Collision Driver s own auto policy must include Collision on auto for Contingent Collision to respond Responds if driver s insurer declines collision claim because driver is driving for Lyft $50,000 limit, $2,500 deductible Contingent Comprehensive Driver s own auto policy must include Comprehensive on auto for Contingent Comprehensive to respond Responds if driver s insurer declines Comprehensive claim because driver is driving for Lyft $50,000 limit, $2,500 deductible

15 The Business Auto Policy (BAP) is Different from the PAP!

16 TNCs and the BAP No livery conveyance exclusion for any coverage in the Business Auto Policy (BAP) or its standard endorsements The ISO BAP was designed to potentially insure a livery conveyance operation (subject to insurer appetite) Liability assumed in an insured contract is automatically covered by the unendorsed BAP But, most standard-line insurers don t offer BAP coverage to livery conveyance operations!

17 Where can the TNC driver get proper insurance? A properly-conditioned Personal Auto Policy plus the coverage offered by the Transportation Network Company A properly-conditioned Business Auto Policy possibly from the Specialty/E&S market in which case the coverage offered to its drivers by the TNC may not be necessary

18 A separate type of transportation service: Carsharing The vehicle owner rents his or her entire vehicle to others when the owner isn t using it (known as carsharing ) examples: RelayRides ( Sprideshare ( Ad infinitum dozens of these out there!

19 Carsharing Implications The unendorsed ISO PAP does not exclude coverage while insured autos are rented to others!! Whoever thought of renting your car to someone you don t know anyway? Insurers are concerned about the growing carsharing model October 2013 ISO introduced new exclusion: PP Personal Vehicle Sharing Program Exclusion Endorsement Excludes all PAP coverage while the covered auto is enrolled in a personal vehicle sharing program and being used by anyone other than you or a family member

20 In Summary Ridesharing, TNCs and other shared economy transportation alternatives are proliferating rapidly The standard unendorsed Personal Auto Policy excludes all coverage when being used by a TNC driver TNCs recognize the insurance challenges of their concepts ISO has just introduced a new exclusion reinforcing the traditional PAP livery conveyance exclusion ISO has also just introduced new TNC coverage buy-back endorsements for PAP A Business Auto Policy if available may be a superior approach from a coverage perspective